For individuals who turn 70-1/2 in a year, the federal tax obligation to begin taking annual “required minimum distributions” from IRAs and other retirement accounts begins. If an individual were to turn 70-1/2 during 2018, then the first required minimum distribution for 2018 would have to be taken by April 1, 2019. The required minimum distribution for 2019 would have to be taken by December 31, 2019, and the required minimum distribution for each year would have to be taken by December 31 of each year. But what happens if you mess up and for some reason fail to take your required minimum distribution? Well, the bad news is that there is a 50% penalty for this failure. So, if your required minimum distribution for 2018 is supposed to be $10,000, then there is a $5,000 penalty for failure to take the distribution in a timely manner. However, all is not necessarily lost if you fail to take the required minimum distribution. The IRS generally will waive the penalty if you catch the mistake before they catch the mistake, and you take the distribution and then file an IRS Form 5329, attaching an explanation for the good faith reason you messed up and didn’t take the required distribution. You worked hard to build up your IRA or other retirement account. Don’t mess up by failing to take your required minimum distributions. But if you do, stay calm. You can probably still fix the problem.
